Why should WA subsidise the rest of Australia?

Larry Graham

That is the question posed in the opening line of one of the Palmer United Party's many WA Senate election advertisements.

Facts have never interfered in a good political stoush and more so when we Sandgropers think we are being badly treated by the East.

Colin Barnett has followed Eric Ripper down the rhetorical GST ripoff line and during the last state election Julie Bishop expressed her concerns.

Recently none other than Treasurer Joe Hockey jumped into the GST debate with some comforting comments for our Premier.

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Ever since he was elected Premier, Colin Barnett has complained loudly and lengthily about how the GST is distributed.

He continually overlooks the irony of that method being introduced along with the GST when he was a senior cabinet minister in Richard Court's government.

Back then the state Libs were more interested in getting the new tax introduced and the cash flowing than the method of distribution.

If ever there was a time when the system was going to change, it was then.

The state government of the day missed its opportunity. It was in the driving seat, the tax could not be introduced without their agreement and they did nothing about it.

Now however, Barnett is gathering allies for his quest to get more of what WA citizens pays in GST.

My earlier column pointed out that Barnett's addiction to spending is the primary cause of the state's budgetary woes. Since then little has changed except the Treasurer.

The point that gets lost in all this shouting is that if Barnett wins, the change he seeks will damage the long term finances of the state.

That aside, maybe one of the reasons pollies find it so hard to understand the GST distribution process is that it is working in precisely the way it was designed to.

Most of our elected ones would never before had to deal with a government policy that actually works as planned.

However, the principle that Colin Barnett is arguing for is for a greater share of all the GST paid by Sandgropers to be returned to this state.

He knows that is not, never has been and never will be how tax systems work.

By their very nature, tax systems are distributive.

Governments take small amounts from a large number of people and create a large pool of money to be redistributed according to the whims of the government of the day.

Barnett's challenges are a fundamental change to that principle and raise some very ugly questions.

Is fiscal equalisation important in a federation?

Why should WA be the only state in the federation to get back all the GST paid by the people in it?

Should population be the criteria for distributing federal funds?

To answer those questions and demonstrate his new basis for taxation systems; the Premier could set an example in his upcoming budget to change the state tax systems so we all get back a greater share of the state taxes we pay.

But he will not do that.

And he won't do it, because it is nonsense and he knows it.

But he has sold the case well and election polling must be telling parties that the public has swallowed the bait because all the parties are now joining in.

It is interesting to note that no-one is actually proposing to do anything, but they are all hoping to trade their expressions of deep concern for your vote.

The conundrum is that if WA gets more, the other states get less and you can bet your bippy that Clive Palmer and Joe Hockey did not campaign that way in their home states.

So, if sharing the GST is a big issue that is unlikely to be sorted – what is really going on?

Federal financial heavies Martin Parkinson and Glen Stevens have added fuel to the GST fire with recent comments on the need for change and the political difficulties these will pose.

The introduction of the tax demonstrated that carving up the pie is not as important as the size of the pie; so the practical solution is to increase the size of the pie.

If the changes are revenue neutral where any income tax compensation matches the cost of the changes, there is no point making the changes.

That is how all this started and governments will not pay the political price of changing the GST unless it increases their tax take and sorts out their budgetary problems

Despite the denials by the Treasurer, there is no doubt in my mind that a long term softening up process is underway.

The next federal election will be about increasing the rate of the GST and removing the exclusions that apply to foodstuffs and education.

But while this GST discussion is raging, let us remember that when this monster tax hike was introduced, Australians were assured that they would be no worse off and increases in prices would be compensated for by reductions in income tax.

Those income tax reductions have since been eaten up by bracket creep and inflation so when we get to talking new GST increases, as I suspect we will, further lasting compensation needs to be front and centre in that discussion.

41 comments so far

But try and get Barnett to admit he was wrong, no hope of that, but then try to get Barnett to admit he is wrong on anything thing for that matter.I remember just before the GST was introduced, people were saying white goods, electronics and other stuff which isn't brought all that often, would be cheaper.The question I asked at the time was how many fridges and televisions are buying this week, along with your food, which you buy every week.People were brought off with a few trinkets.

Commenter

BigD

Location

Perth

Date and time

April 07, 2014, 7:40AM

First home buyer grants were also invented by JWH to offset the new tax on building. Now the echo-boomers can't stop whining about how they want cheap housing. Yet another example of how socialism doesn't work. It just gets exploited by some and others miss out. But it's a good career if you're in admin. There would be far fewer careers in admin without socialism. Sit around eating cake and fiddling with the aircon.

Commenter

bg

Date and time

April 07, 2014, 11:03AM

Except socialism is grand when it suits the fascists. Like when they need medical treatment, or to educate their kids.

Commenter

Boganomics

Date and time

April 07, 2014, 12:38PM

@ bg The GST is the biggest scam ever pulled, no it doesn't include food yet.But how does the food get too the super market, I don't think it walks there, but there is GST on the diesel in truck which delivers it, so you paid GST on food by default.I gather by JWH you mean John Howard, well that is first time I ever heard of him referred to as having socialism tendencies and no I can't stand him if you wondered.You said socialism doesn't work, well plenty of people have at some stage benefitted from government handouts, 2 areas which come straight to mind are education and health, now these are 2 things on which I would love to follow on the UK and US examples, no government handouts to private hospitals and schools, survive or sink.People hate socialism, but convince themselves it's not socialism when I benefits them.Socialism fine you don't want it, but don't live of the largesse of it.

Commenter

BigD

Location

Perth

Date and time

April 07, 2014, 2:00PM

Larry as always you only give half of the story.

I suggest you look very closely at how the GST is distributed and what is and is not taken into consideration in that calculation.If you look very carefully you will find that gambling taxes are not taken into the equation as income by the states.

Western Australia has a very small gambling tax income compared to Victoria and all the other states. In short Victoria receives about $2 Billion in gambling taxes and if that was taken as income to the state then they would receive possible $2 Billion less in GST the same with every other state by varying amounts and Western Australia would receive possible $2 billion more. Do you understand now Larry or are you still on the misinformation track?

Commenter

Phil

Location

Leeming WA

Date and time

April 07, 2014, 7:55AM

Phil. Other states have chosen to allow more extensive gambling and therefore have the positive (income) and negative (social) aspects to deal with. If one state legalised and taxed a particular illicit drug that was not legal in WA, do you believe WA should benefit from their local taxes?

How quickly people forget the money WA received from GST revenue contributed by other states in past years.

Commenter

T

Location

Perth

Date and time

April 07, 2014, 9:33AM

I haven’t forgotten ‘T’, except for the financial years 04-05 (103%) and 05-06 (103%), when has WA gotten back more than it has contributed in GST? WA currently only receives 45% of its GST back to the state. The biggest receiver is the NT who get a whopping (531%), followed by TAS (161%), SA (126%), ACT (122%), QLD (106%), NSW (97%) and VIC (90%). Since the introduction of the GST in 2000, and apart from two years of 3% extra GST revenue, WA has more than taken care of its own finances as well as our poorer cousins NT, SA, TAS & ACT, whom since the introduction of the GST have received more GST returns than they contribute.

Commenter

WayneT

Location

Port Kennedy WA

Date and time

April 07, 2014, 10:44AM

T, I don't think anyone is forgetting that WA received some additional funds over the early years of the GST. However, I think we need to recognise that no state has ever dropped as low as we have in the share of our GST and this small contribution we received before has been more than offset (in fact, in any one year now we are losing more than we ever received extra in total). This will continue for many years to come with iron ore prices expected to remain high for quite some time. There is no reason gambling income should be excluded and the excuse that it comes with negative social issues is bull crap. We also have negative consequences due to mining in the environmental impact that Tasmania is so keen to avoid. Why should they continue to make it difficult for miners to develop their projects and then essentially receive income from our mines?? The formula is a joke, either all revenue is included or it isn't. The Court government should have kicked up more of a stink about the formula, however it is not too late to right these wrongs now.

Commenter

Nick

Location

Perth

Date and time

April 07, 2014, 11:34AM

As far as we are concerned the west is a cesspool of whining fascists.They live off the teat of the east for 90/100 years, yet for the other 10 that they positively contribute, (i.e. pay some of that money back) all they do is complain about getting ripped off.I am sure that most people in the east, myself included, think that Australia would be better off without WA anyway.

Commenter

Padrino

Location

Over East

Date and time

April 07, 2014, 8:26AM

to padrinoYou are like a lot of voters on the east coast who had the Labour Party running all the eastern state they governed into a financial mess and WA has had to pay for there incompetence for many years, crawl back under the rock you live under.Western Australia would be better of on its own as we would not have to put up with parasites like you.